JORDAN THIBODEAU: So thank you all for joining us.

I'd like to introduce you to Ray Dalio.

He's the founder of Bridgewater Associates.

He founded that 1975.

And it is one of the most successful hedge

funds in history.

So let's give Ray a nice Google welcome.

[APPLAUSE]

RAY DALIO: I'm in a stage in my life

where I'm entering what I call the third stage of my life.

I think of life as existing in three big stages.

The first is that you're learning from others.

You're dependent on others.

You're a kid.

The second stage of your life is then you're working.

Others are dependent on you.

And you're trying to be successful.

Then after, you get to the later stage in life.

Third stage of your life is others

are successful without you.

And that you're free--

according to Joseph Campbell free

to live and free to die, OK?

So that you have that element of freedom.

And so I'm at a stage in my life where--

I started Bridgewater out of a two-bedroom apartment in 1975,

and I've brought it to where it is now.

According to "Fortune," it's the fifth most important

private company in the United States.

It's been successful.

It's been good.

And that my objective at this particular stage

is to help others be successful without me.

I learned along the way certain principles.

Every time I would make a decision,

I would write down the reasons I would make that decision.

And I put them out.

I debated them.

And I developed these principles.

So think about principles as just

being these reasons for making a decision if you're

in this situation, how do you deal with it?

It was also very important to me to operate

in a very unusual way that seemed very sensible to me.

And it's an idea meritocratic way.

So I want to describe Bridgewater

as being an idea meritocracy-- in other words,

a real idea meritocracy, which I'll explain and show to you,

so a real idea meritocracy in which the goals are

meaningful work and meaningful relationships.

Meaningful work-- I mean you're on a mission,

that you feel you're on a mission together

to do those great things.

And meaningful relationships, meaning

that you care about each other.

It's part of a community.

And to be on that mission together.

And that was really great in terms of our success.

But it was meaningful work and meaningful relationships

through radical truthfulness and radical transparency.

That means, literally, people saying anything

that they feel that they want to say in terms of being polite,

of course, but sharing what they really believe is true

and working themselves through to have an idea meritocratic

way and to literally record everything for everybody

to hear.

So I mean, literally, there are a combination of videos

and tapes of all meetings that happen so that nothing

is hidden, because you can't have a real idea

meritocracy if you can't see things yourself.

And so it's a very unusual place,

and it was really the basis of our success.

And I want to explain that way of operating

to you because this idea meritocratic way, in which

there's meaningful work and meaningful relationships

through radical truthfulness and radical transparency

so that you could have thoughtful disagreement

and have ways of getting past that disagreement to then move

on, like a legal system.

That has been the key to our success.

So that's what I want to try to convey to you.

And I'm just going to take a few minutes

to try to go through a few slides

to give you a sense of this.

I wanted big, audacious goals.

I wish big, audacious goals for you.

Go after your goals

And on your way to your goals, you're

going to encounter your problems and your failures, right?

That's going to happen.

Otherwise you just go straight to your goals.

No.

That's the learning process.

You account in your failures.

Failures is part of the learning process.

From the failures, what I found was great.

I started to think of failures as lessons.

I started to think of them as puzzles

rather than develop emotional reactions to those failures.

I started think, pain plus quality reflection

would give me progress.

So I started to think of almost the failures like puzzles

that if I could study the puzzles, the puzzles was,

what would I do differently in the future

that wouldn't produce that problem again when it happened?

And then I would reflect--

well, what was that?

That would be my principles.

What would I do differently in the future?

If I solved that puzzle, I would get a gem.

And the gem was principle, a principle

to handle it better in the future,

because failure is a learning process.

It's an essential part of the learning process.

If you can realize that and you write down

those principles-- write them down.

It's been fantastic.

So we'd learn those principles.

And then it would help me improve.

And then I would go on to more audacious goals.

And I look at evolution-- personal evolution

or almost every evolution-- evolution

of a company, evolution of everything,

as being this constant looping process that I sort of think

of as this five-step process.

In other words, to be successful, you have to out

you have to do five things.

First, you have to know what your goals are

and go after those goals.

Be clear on your goals.

And you will encounter problems on the way to those goals.

Those will be your barriers, OK?

There are tests now.

Don't just emotionally complain.

Think about them as your problems.

You have to diagnose those problems to the root cause

to get at the root cause.

And that root cause might be yourself,

what you're doing wrong or what somebody else is doing wrong.

So you can't depersonalize it.

You have to really look at it so that you make those changes.

And when you get at that root cause,

only by knowing that root cause can then you

design a way to get around that root cause.

Like, if you're not good at something yourself,

it's OK if you find somebody else who's good at the things

that you're not good at because nobody can be good

at everything, right?

But you have to do that.

You just can't keep banging yourself on the wall.

So you have to design something that's practical to get around

with it.

And then you have to follow through and do it.

A lot of people come up with designs,

but you have to do the thing that's necessary.

And by trying that thing that's necessary, again ,

you will find out, are you getting to your goals or are

you encountering your next set of problems and so on?

And that, I believe, is the personal evolutionary process

that has helped me.

Those rules that I was able to write down

and that you can get in this book, "Principles," which

is why I'm passing them along.

Those rules-- we were actually able to then

put into the algorithms and build decision-making processes

that replicate the brain.

We'll get into that in a minute.

OK, so in order to be successful in the markets,

one has to be an independent thinker.

In order to be an entrepreneur, one

has to be an independent thinker and bet against the consensus

and be right, because the consensus in the markets

is built into the price.

Whatever anybody thinks, it's built into the price.

So you have to bet against the consensus.

And you're going to be wrong a fair amount of times

about betting against the consensus.

But in any case, you need to be an independent thinker.

And for an entrepreneur, you need

to be an independent thinker, because you're

inventing new stuff.

You're doing something.

And you don't know if you're right.

So in order for me to be successful,

I needed to have a bunch of independent thinkers

in order to have them be effective.

OK, well, now, how are you going to get

this bunch of independent thinkers

to agree on anything, OK?

I had to have an idea meritocracy.

In other words, I had to have a system that literally,

systematically allows for thoughtful disagreement

so that this idea meritocratic people could then

get at the right answer, because that's fantastic

if you can have that thoughtful disagreement

to get at the right answer.

It's very powerful.

By having that and then systematizing it--

principled systems--

a system for having thoughtful disagreement for an idea

meritocracy--

we could produce greater amounts of successes.

We also produced failures.

But we would look at that way, produce our learnings.

And that produced, as a result, happy employees who really

believe in this idea meritocratic thing

and owned the company, intellectually and otherwise,

own the company.

And we had happy employees.

And then it became easier to attract those types of people,

those types of people who believe that everybody has

the right to make sense of things

and that there's a power in thoughtful disagreement.

And that allowed us to attract more people,

and that was the basis of going from the two-bedroom apartment

to Bridgewater now.

So now we have about 1,500 people,

and that's how it works as an idea meritocracy.

And I want to pass that along to you,

and I want to say, OK, so what is an idea meritocracy?

You could have your own versions of this.

You pick what is fine to you.

But three different things are necessary for an idea

meritocracy.

First, everybody has to put their honest thoughts

on the table to see.

Now, I watch this, and I think it's so many organizations, so

many people--

they all keep it bottled up in their heads, right?

And they're critical behind the scenes.

And that's bad.

So can you put your honest thoughts

on the table with other people's honest thoughts

so that you understand what people are thinking, OK?

It makes everything, first of all,

a lot more efficient, right?

It's terribly inefficient when everybody doesn't know what

the other person's thinking.

And then also, it doesn't allow ownership.

It can't be an idea meritocracy if you just

don't work it through.

Everybody's talking behind the scenes.

We don't allow talking behind the scenes,

but anybody can challenge anything at any time.

OK, then you have to understand the art

of thoughtful disagreement, thoughtful disagreement.

So many people react badly to disagreement.

You have to change the modus operandi

and start your thinking.

It should be curiosity how do you know who's right?